Friday, January 15, 2010

America Slides Deeper into Depression as Wall Street Revels

Ambrose Evans-Pritchard writes in The Telegraph that "December was the worst month for US unemployment since the Great Recession began," but it would be hard for most Americans to notice wouldn't it (if they weren't jobless already, of course) if the MSM hasn't covered these numbers. And they have, but it's pretty well hidden behind the grand news that "The stock market is rallying!" One seemingly wise commenter (Aurora E. Hunter) has this sobering aside:

The laws and conditions that allowed the last bubble to grow and burst are still extant and at work churning out the next bubble, due, I'd say, at the latest: midyear.
And as you know if you've been following this since September 2008, the banksters are still hiding tons of toxic assets. Does it not occur to you that they have some very interesting strategies planned to be able to rid themselves of these at your expense? No? Then what do you think?

I believe that heroes are emerging from this most devastating of American crises: William K. Black, Marcy Kaptur, Paul Craig Roberts, Dennis Kucinich - people who would have never been covered seriously before by mainstream media journalists are now the people with the courage and integrity identifying them to be the leaders out of this crisis. Simon Johnson is another.

Simon Johnson is a British-American economist. He currently is the Ronald A. Kurtz Professor of Entrepreneurship at the Sloan School of Management at MIT. He has held a wide variety of academic and policy-related positions, including Professor of Economics at Duke University's Fuqua School of Business. From March 2007 through the end of August 2008 he was Chief Economist of the International Monetary Fund. He is an expert on financial crises in both the developed world and in emerging markets. He co-founded with James Kwak the BaselineScenario.com website chronicling the current financial crisis, to substantial critical acclaim. In March 2009 he gave interviews on The Colbert Report and NPR's Fresh Air, stating on the former that "America's economy resembles an unstable, emerging market". In the May 2009 issue of The Atlantic Online Johnson argues that the U.S. economic recovery will fail unless the "financial oligarchy", responsible for the crisis in the first place, now using its influence to block necessary reform, is broken. The government, captured by the finance industry, seemingly "helpless, or unwilling, to act against them", is, according to Johnson, running out of time needed to prevent a true Depression. So he knows a little something about what's happening now. Take a listen. Paul Craig Roberts says that Americans are "Insouciant." You gotta give him props for etymology (emphasis marks added - Ed.).

The Underwear Bomber case indicates that whoever is behind these bomb scares is laughing at our gullibility.

How realistic is it that al-Qaida, an organization that allegedly pulled off the most fantastic terror attack in world history, would in these days of heightened security choose for an attack on an airliner a person who is the most conspicuous of all? Umar Farouk Mutallab had a one-way ticket, no luggage, no passport, and his father, reportedly a CIA and Mossad asset, had reported him to the CIA and Mossad. Does anyone really believe that al-Qaida would choose as an airliner bomber a person waving every red flag imaginable?

This obvious question has escaped the US media, a collection of salespersons marketing full body scanning machines for airports.

Would al Qaida, with its extensive knowledge of explosives, have armed Umar with a “bomb” that experts say couldn’t have blown up his own seat?

It is difficult to imagine a more gullible population than America’s, but do even Americans believe this story?

Since 9/11 the F.B.I. has been busy enticing people, who lack organizational skills, into “terrorist plots” that consists of F.B.I. initiated hot air talk. These ridiculous stings are then taken to trial, and the media fans the flames of fear of “home-grown terrorist plots against Americans."

There is little doubt that those interested in leading the U.S. deeper into a police state and deeper into a “war on terror” are active in adding orchestrated events to whatever real ones real terrorists manage to accomplish.

The paucity of real terrorists has caused the U.S. government and its Ministry of Truth to promote the Taliban to terrorist rank. The problem is that these “terrorist acts” are taking place thousands of miles away in lands that the average American cannot find on a map and, thus, lack scare value. To keep the peril alive for Americans, we have the Underwear Bomb Plot.

What will be next? An elaborate head of hair laced with nano-thermite?

The “war on terror” is a far greater threat to Americans than all the terrorists in the world combined. This is so because the “war on terror” has destroyed the U.S. Constitution and the Bill of Rights. American citizens are now helpless in the event someone in government decides that some constitutionally protected behavior, such as free speech, or a contribution to a children’s hospital in Gaza, where Hamas, a U.S.-declared “terrorist organization,” happens to be the elected government, constitutes aiding and abetting terrorism.

On January 5 a ruling by the Federal Appeals Court in the District of Columbia gave away the most essential protection of liberty by declaring that the U.S. government is not bound by law during war. The ruling absolves Washington from complying with America’s own laws and from complying with international laws, such as the Geneva Conventions.

It makes a mockery of all war crime trials everywhere. By elevating the executive branch above the law, the court gave the government carte blanche.

The rationale offered by the court for refusing to uphold the law came from Judge Janice Rogers Brown, who said that America had been pushed by war past “the leading edge of a new and frightening paradigm, one that demands new rules be written. War is a challenge to law, and the law must adjust.” By “adjust” she means “ be set aside” or “be thrown out.”

The U.S. Supreme Court has refused to defend both the Constitution and the principle that government is not above the law. Last December 14 the Supreme Court refused to review a ruling by the Federal Appeals Court in the District of Columbia, which dismissed a torture case with the argument that “torture is a foreseeable consequence of the military’s detention of suspected enemy combatants.”

In other words, neither U.S. nor international laws against torture can be enforced in U.S. courts. The opinion was written by Judge Karen Lecraft Henderson.

The “war on terror,” which is enriching Halliburton, Blackwater (now operating under an alias), and the military/security complex, while denying Americans health care, is running up debt that is a threat to Americans’ purchasing power and living standards. The contrast between America’s sanctimonious rhetoric and the murder of civilians and torture of prisoners has destroyed America’s reputation and caused Europeans as well as Muslims to despise the United States.

The sacrifice of the Constitution and rule of law to a hyped “theorist threat” has destroyed the heart and soul of America herself. As a poet wrote, “our world in stupor lies.”

Read the rest here (you should be sitting down if not lying down for this newsy item). And now, back to the "happy" economic news (emphasis marks added for your further enjoyment - Ed.).

The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters. Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism. The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings. The local sheriff will escort them out of the door, often with some sympathy –– just like the police in 1932, mostly Irish Catholics who tithed 1pc of their pay for soup kitchens. Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck's Grapes of Wrath. Judges are finding ways to block evictions. One magistrate in Minnesota halted a case calling the creditor "harsh, repugnant, shocking and repulsive". We are not far from a de facto moratorium in some areas.

This is how it ended between 1932 and 1934, when half the US states declared moratoria or "Farm Holidays". Such flexibility innoculated America's democracy against the appeal of Red Unions and Coughlin Fascists. The home seizures are occurring despite frantic efforts by the Obama administration to delay the process. This policy is entirely justified given the scale of the social crisis. But it also masks the continued rot in the housing market, allows lenders to hide losses, and stores up an ever larger overhang of unsold properties. It takes heroic naivety to think the US housing market has turned the corner (apologies to Goldman Sachs, as always).

The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of "option ARM" contracts due to reset violently upwards this year and next. US house prices have eked out five months of gains on the Case-Shiller index, but momentum stalled in October in half the cities even before the latest surge of 40 basis points in mortgage rates. Karl Case (of the index) says prices may sink another 15pc. "If the 2008 and 2009 loans go bad, then we're back where we were before – in a nightmare." David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War. Fed hawks are playing with fire by talking up about exit strategies, not for the first time. This is what they did in June 2008. We know what happened three months later. For the record, manufacturing capacity use at 67.2pc, and "auto-buying intentions" are the lowest ever. The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc. Professor Tim Congdon from International Monetary Research said the Fed is baking deflation into the pie later this year, and perhaps a double-dip recession. Europe is even worse. This has not stopped an army of commentators in trying to bounce the Fed into early rate rises. They accuse Ben Bernanke of repeating the error of 2004 when the Fed waited too long. Sometimes you just want to scream. In 2004 there was no housing collapse, unemployment was 5.5pc, banks were in rude good health, and the Fed Multiplier was 1.73. How anybody can see imminent inflation in the dying embers of core PCE, just 0.1pc in November, is beyond me. Mr Rosenberg is asked by clients why Wall Street does not seem to agree with his grim analysis. His answer is that this is the same Mr Market that bought stocks in October 1987 when they were 25pc overvalued on Shiller "10-year normalized earnings basis" – exactly as they are today – and bought them at even more overvalued prices in 2007, long after the property crash had begun, Bear Stearns funds had imploded, and credit had its August heart attack.

The stock market has become a lagging indicator. Tear up the textbooks.

I know I am.

Listen to Simon Johnson and Marcy Kaptur on a show that you will never see again (soon). Marcy says that we need to hire 1,000 agents to investigate the mortgage fraud immediately. I'm thinking 10,000. Suzan ______________________

3 comments:

Jack Jodell said...

Suzan,
Even 10,000 might not be able to fully do the job. But one thing is for certain: these arrogant jerks may think their institutions are too big to fail, but let's show them that they, themselves, are not too big to JAIL!

Suzan said...

Well, all right!

Now, to get that movement started . . . .

Thanks for commenting.

S

libhom said...

Americans have allowed ourselves to be too frightened by terrorism. Politicians, banksters, and pundits have used this to get us to go along with all sorts of nonsense.